SFDC Ireland Ltd Vs DCIT (ITAT Delhi)
The assessee, a tax resident of Ireland and successor to Tableau International, Unlimited Company, Ireland, challenged the final assessment order passed under sections 143(3) read with 144C(13) of the Income-tax Act for AY 2020-21, whereby receipts of ₹73,41,69,869 from Indian customers were taxed as Fees for Technical Services (FTS) under section 115A of the Act and Article 12 of the India-Ireland Double Taxation Avoidance Agreement (DTAA). The receipts comprised revenue from supply of non-customised shrink-wrapped/off-the-shelf/electronically downloadable software and software upgrades, Software as a Service (SaaS), support and maintenance services, training services, and partner fees. The assessee had claimed these receipts were exempt from tax in India, contending that it sold only copyrighted articles without granting any copyright rights and that, in the absence of a Permanent Establishment (PE) in India, the receipts constituted business income not taxable in India under the DTAA.
The Assessing Officer (AO) held that the assessee was not merely selling standard software but was providing comprehensive technology-enabled solutions. Relying on the assessee’s website, customer examples, reseller arrangements, End User Licence Agreements (EULA), and other agreements, the AO concluded that technology, knowledge, and technical capabilities were made available to customers, including through limited rights to modify sample source code, professional services, training, tutorials, support resources, and reseller capabilities. The AO further held that the services constituted technical consultancy and were taxable as FTS under section 9(1)(vii) of the Act and Article 12 of the India-Ireland DTAA. The Dispute Resolution Panel (DRP), after obtaining a remand report and considering the assessee’s rejoinder, upheld the AO’s conclusions, finding that the software and related services were not standard and non-customizable and that the receipts satisfied the requirements of FTS under the DTAA.
